No political meddling in Phala Phala investigation
Stash of dollars stolen
The SARB's Financial Surveillance Department cleared Ramaphosa on the basis that no transaction has been "perfected", prompting accusations of a cover-up.
South African Reserve Bank (SARB) governor Lesetja Kganyago says there was no political meddling in the central bank’s investigation into the stash of dollars stolen from President Cyril Ramaphosa’s Phala Phala farm in early 2020. The cash was stolen from under a cushion on a couch, prompting accusations ranging from money laundering to contravention of foreign exchange controls. Kganyago told PSG’s Think Big webinar on Thursday that the investigation was conducted without fear, favour or prejudice. The SARB governor also mounted a staunch defence of the central bank’s inflation-targeting policy, which has resulted in a series of rate hikes that have pushed borrowing costs to a 14-year high.
"Politicians cannot come into the Reserve Bank on any of the matters that we are busy with," Kganyago told host Alishia Seckam. "The investigation that has taken place that is what every South African would have been subjected to."
The SARB announced on 21 August that its investigators had cleared Ramaphosa and Ntaba Nyoni Estates, the legal entity that owns the president’s Phala Phala game farm, of contravening foreign exchange regulations following the sale of buffalo to a Sudanese businessman.
The buyer left $580 000 (R11.3 million) at the farm, though the animals were never delivered, raising questions as to why the money was not declared to authorities in accordance with foreign exchange legislation.
Exchange control
The SARB’s Financial Surveillance Department cleared Ramaphosa on the basis that no transaction has been "perfected", prompting accusations of a cover-up. The DA has applied to the Gauteng High Court in Pretoria for a finding that Ramaphosa did indeed violate exchange controls, a case that may compel the SARB being to release its investigative report.
Kganyago said: “My investigators have reached a conclusion. We have got no reason to second-guess them. The report itself has not been released because, by law, we could not release that report. When we are in court, we will ventilate it there. My investigators will file a replying affidavit. The court is the final arbiter about whether the laws have been interpreted correctly or not.”
Kganyago, who has been the central bank governor since November 2014, also defended the SARB’s policy of using interest rates as a tool to maintain inflation within a target band of 3% and 6%.
The SARB has hiked its benchmark lending rate by 4.75 percentage points to 8.25% since it began tightening monetary policy in November 2021, prompting criticism in some quarters that it was hurting consumers and the economy.
"If anybody wants to change the mandate of the Reserve Bank, they would have to change the constitution," said Kganyago. "None of the political parties came to engage us and said that 'we think your independence must go'. But even if they were to come and say, 'your independence must go,' we will tell them go change the Constitution."
Interest rates
Kganyago argued it was inflation that eroded consumers’ disposable income rather than higher interest rates, adding that it was the poor who suffered most from rising prices. Asked whether the SARB’s 3% to 6% inflation target was appropriate for South Africa, he said no country could grow sustainably with high inflation, specifically mentioning Zimbabwe, Turkey, Angola and Ghana.
"Any development strategy that does not promote price stability is by definition anti-poor because the poor feel the ravages of inflation more than any other income group, Kganyago said. If anybody tells us we must stop paying attention to inflation, they are telling us we must stop paying attention to the poor."
On the rand the governor said it was futile to try and protect the currency from depreciation, adding that the SARB only watched the exchange rate to the extent that it influenced inflation, and was not a variable the Bank controls.
Asked about proposals to launch a common BRICS currency, Kganyago such an initiative would require a common central bank, a common fiscal policy and a banking union with a common regulatory framework. He added that efforts by BRICS nations (Brazil, Russia, India, China and SA) to promote interconnectedness and inter-operability of national payments systems to make cross-border trade settlement easier, would likely be more beneficial than a common currency.
"You can’t have one currency and five fiscal policies," said Kganyago. "Who said that currency would be less volatile? It will be as volatile as the other currencies are. It might actually be more volatile given that it has got five fiscal policies."
Kganyago went on to say South Africa’s structural economic challenges, which ranged from electricity to education constraints, could not be solved by the central bank alone.
“No amount of screaming at the central bank is going to improve the education outcomes. As we deploy interest rates, people feel pain. The medicine is not nice, it’s a bitter medicine.But if the patient does not take the medicine now, this patient might end up in the ICU," he said.-Fin24